Fifth Third Bank protects the future Featured

7:00pm EDT February 23, 2009

Banking in the current economy can be

scary. But the passage of the

Emergency Economic Stabilization

Act in October provided some relief to businesses and consumers worried about their

bank accounts. This act increased the

amount for Federal Deposit Insurance Corp.

insurance in certain types of bank accounts.

“The modifications enacted in 2008 were a

result of the economic crisis that involved

subprime mortgages and mortgage-backed

securities issues,” says Terri L. Crane, vice

president of corporate treasury management at Fifth Third Bank. “These recent

changes and improvements should help

continue the confidence of both the consumer and financial communities.”

Smart Business spoke with Crane about

what changes were made to FDIC insurance, the benefits of these changes and how

the Certificate of Deposit Account Registry

Service plays a role with FDIC insurance.

What changes were made to FDIC insurance,

and why were they made?

  • All balances in transaction or checking

    accounts, either personal or business, that

    do not earn interest are insured in full,

    regardless of the balance. Those accounts

    that are interest bearing are still covered

    under the standard and new regulations for

    bank accounts. Should you have one or

    more typical checking accounts that earn

    no interest, you are now insured for all

    funds, regardless of the size of your balance. 

  • All interest-bearing accounts are now

    insured up to $250,000, instead of the usual

    $100,000. This increase is a major positive

    development, both from a psychological

    and financial perspective. It shows that the

    federal government has a strong belief and

    commitment in the U.S. banking system,

    even in a period of economic crisis. 

    How long will these changes last?

    These changes are not permanent. They

    apply to all insured banking institutions

    until Dec. 31. After that date, insurance limits will revert to their former levels. Your

    regular accounts will again be insured up to

    $100,000 and retirement accounts will be

    insured up to $250,000.

    On Jan. 1, 2010, the standard coverage limit

    will return to $100,000 for all deposit categories except IRAs and certain retirement

    accounts, which will continue to be insured

    up to $250,000 per owner.

    The issue surrounding the increased FDIC

    coverage that has yet to be resolved is how

    the financial organizations will pass along

    increased insurance premiums imposed

    upon them to depository customers at large.

    What are the benefits of these changes?

    This action will provide the FDIC with

    flexibility to provide a 100 percent guarantee for newly issued senior unsecured debt

    and noninterest bearing transaction deposit

    accounts at FDIC insured institutions.

    Along with the benefits of higher insurance limits, the commitment of the federal

    government and the FDIC should instill consumer confidence in the continuing stability

    of U.S. banks.

    What is CDARS?

    CDARS is an alternative way to enjoy full

    FDIC insurance on deposits of up to $50 million. With CDARS, you sign one agreement

    with a participating local bank or other

    financial institution of your choice. They in

    turn place CDs at other institutions up to

    FDIC maximums but maintain that for you

    by earning one interest rate and receiving

    one regular statement. CDARS is a great

    solution for depositors like nonprofits, public funds and businesses; advisers, including

    trustees, certified public accountants, financial planners and lawyers; and individuals as

    well as motivated investors.

    How can CDARS be useful to businesses?

  • Full insurance. Using the CDARS service, you can access up to $50 million in FDIC

    protection on CD investments. 

  • One bank. You work with a local

    CDARS network member to secure large

    deposits, from $10,000 to $50 million. 

  • One rate. You earn one interest rate on

    CD investments placed through CDARS.

    With CDARS, there is no need to negotiate

    multiple rates or manually tally disbursements for each CD. 

  • One statement. You receive one regular

    statement detailing your CD investments.

    You no longer need to consolidate statements at the end of each month, quarter or


  • No hidden fees. There are no hidden

    fees of any kind. You will not be charged

    annual subscription or transaction fees for

    using the CDARS service. The rate you see

    is the rate you get. 

  • No collateralization. Because CDARS

    deposits are eligible for full FDIC protection, you may not need to collateralize your

    deposits. This eliminates the time-consuming task of tracking collateral values. 

  • A wide variety of maturities. You can

    select from various maturities — ranging

    from four weeks to five years (260 weeks) and choose the terms that best suit your

    investment needs. 

  • Community involvement. Your funds

    can support lending initiatives, including

    special development projects that strengthen the local community. 

    TERRI L. CRANE is vice president of corporate treasury management at Fifth Third Bank. Reach her at (513) 534-0677 or